ENTERPRISE VALUE GOVERNANCE OF IT …

1 ENTERPRISEVALUE:GOVERNANCEOFIT INVESTMENTSENTERPRISEVALUE:GOVERNANCEOFI T INVESTMENTSThe Val IT FrameworkBASED ONCOBIT IT GOVERNANCEINSTITUTE2 The IT GOVERNANCE Institute The IT GOVERNANCE Institute (ITGITM) ( ) was established in 1998 to advance international thinking and standards indirecting and controlling an ENTERPRISE s information technology. Effective IT GOVERNANCE helps ensure that IT supports businessgoals, optimises business investment in IT, and appropriately manages IT-related risks and opportunities. The IT GovernanceInstitute offers original research, electronic resources and case studies to assist ENTERPRISE leaders and boards of directors in theirIT GOVERNANCE IT GOVERNANCE Institute (the Owner ) has designed and created this publication, titled ENTERPRISE VALUE : Governanceof IT Investments, The Val IT Framework(the Work ), primarily as an educational resource for chief information officers,senior business and IT management.

2 The Owner makes no claim that use of any of the Work will assure a successfuloutcome. The Work should not be considered inclusive of any proper information, procedures and tests or exclusive of otherinformation, procedures and tests that are reasonably directed to obtaining the same results. In determining the propriety of any specific information, procedure or test, chief information officers, senior business and IT management should applytheir own professional judgement to the specific circumstances presented by the particular systems or informationtechnology 2006 IT GOVERNANCE Institute. All rights reserved. No part of this publication may be used, copied, reproduced,modified, distributed, displayed, stored in a retrieval system or transmitted in any form by any means (electronic, mechanical,photocopying, recording or otherwise), without the prior written authorisation of the IT GOVERNANCE Institute.

3 Reproduction ofselections of this publication for internal and noncommercial or academic use only is permitted and must include full attributionof the material s source. No other right or permission is granted with respect to this publication includes tables and figures developed by, and used with the permission of, SeaQuation Investment 2006 SeaQuation GOVERNANCE Institute3701 Algonquin Road, Suite 1010 Rolling Meadows, IL 60008 USAP hone: + : site: 1-933284-32-3 ENTERPRISE VALUE : GOVERNANCE of IT Investments, The Val IT Framework Printed in the United States of AmericaVALIT3IT GOVERNANCEINSTITUTETHEVALITFRAMEWORKTHEI T GOVERNANCEINSTITUTE WISHES TO RECOGNISE:The ITGI Board of TrusteesEverett C.

4 Johnson, CPA, Deloitte & Touche (retired), USA, International PresidentAbdul Hamid Bin Abdullah, CISA, CPA, Auditor General s Office, Singapore, Vice PresidentWilliam C. Boni, CISM, Motorola, USA, Vice PresidentJean-Louis Leignel, MAGE Conseil, France, Vice PresidentLucio Augusto Molina Focazzio, CISA, Colombia, Vice PresidentHoward Nicholson, CISA, City of Salisbury, Australia, Vice PresidentBent Poulsen, CISA, CISM, VP Securities Services, Denmark, Vice PresidentFrank Yam, CISA, CIA, CCP, CFE, CFSA, FFA, FHKCS, Focus Strategic Group, Hong Kong, Vice PresidentMarios Damianides, CISA, CISM, CA, CPA, Ernst & Young LLP, USA, Past International PresidentRobert S.

5 Roussey, CPA, University of Southern California, USA, Past International PresidentEmil D Angelo, CISA, CISM, Bank of Tokyo-Mitsubishi, USA, TrusteeRonald Saull, CSP, Great-West Life and IGM Financial, Canada, TrusteeErik Guldentops, CISA, CISM, Belgium, Advisor, IT GOVERNANCE InstituteThe Development Team Georges Ataya, CISA, CISM, CISSP, Solvay Business School, BelgiumJac Cuypers, Ernst & Young, BelgiumSteven De Haes, University of Antwerp Management School, BelgiumErik Guldentops, CISA, CISM, University of Antwerp Management School, Belgium Gary Hardy, IT Winners, South AfricaGerrit Koning, SeaQuation, The NetherlandsCormac Petit, IBM Institute for Business VALUE , The Netherlands Michael Schirmbrand, CISA, CISM, CPA, KPMG, AustriaEddy Schuermans, CISA, PricewaterhouseCoopers, BelgiumJohn Spangenberg, SeaQuation, The NetherlandsDirk Steuperaert, CISA, PricewaterhouseCoopers, BelgiumJohn Thorp, CMC, ISP, The Thorp Network, CanadaChris Tiernan, Grosvenor Consultancy Services, UKAlfred Van Gils, CISA, Philips, The NetherlandsErik van Heijningen, RA, ING, The NetherlandsPaul Williams, MBCS, FCA, Paul Williams Consulting, UKThe ITGI Committee William C.

6 Boni, CISM, Motorola, USA, ChairJean-Louis Leignel, MAGE Conseil, France, Vice ChairErik Guldentops, CISA, CISM, University of Antwerp Management School, Belgium Tony Hayes, FCPA, Queensland Government, AustraliaAnil Jogani, CISA, FCA, Tally Solutions Limited, UKJohn W. Lainhart IV, CISA, CISM, IBM, USAM ichael Schirmbrand, CISA, CISM, CPA, KPMG, AustriaEddy Schuermans, CISA, PricewaterhouseCoopers, BelgiumRonald Saull, CSP, Great-West Life and IGM Financial, CanadaThe Expert ReviewersGary Bannister, FCMA, CPA, BP, USAS ushil Chatterji, Edutech Enterprises, SingaporeVincent Courtois, IT Financial Analyst, National Bank of Belgium, BelguimUrs Fischer, CISA, CIA, CPA, Swiss Life, SwitzerlandJohn Lainhart IV, CISA, CISM, IBM, USANick Robinson, Ernst & Young, USAJan van Puffelen, Unisys Nederland NV.

7 The NetherlandsITGI is pleased to recognise its affiliates and sponsorsISACA chaptersBindview CorporationCAACKNOWLEDGEMENTSIT GOVERNANCEINSTITUTE4 VALITIT GOVERNANCEINSTITUTEThe following organisations support Val IT as good practice for GOVERNANCE of IT-related business investments:ITGIWOULD LIKE TO ACKNOWLEDGE:Fujitsu, whose generous sharing of its many years of experience with ENTERPRISE VALUE management contributed significantly to the development of the Val IT management practicesING and SeaQuation for sharing their experience and for their major contribution to thedevelopment of the Val IT management practices. ING, originally through its IT performance measurement and investment management workflow and since 2005 as SeaQuation, a wholly independent company, has done substantial investment research into IT and ENTERPRISE VALUE .

8 VALIT5IT GOVERNANCEINSTITUTETHEVALITFRAMEWORK1. THEVALIT VALIT of Val Need for Val New Is Val IT Relevant to IT GOVERNANCE ?.. THEVALIT IT IT PROCESSES Relationship Between Val IT and : VALUE GOVERNANCE (VG)..20 Process: Portfolio Management (PM)..23 Process: Investment Management (IM).. OFCONTENTSIT GOVERNANCEINSTITUTE6 VALITThis document forms part of the Val ITTM initiative from theIT GOVERNANCE Institute. The initiative is intended to respondto the need for organisations to optimise the realisation ofvalue from IT investments. The initiative has drawn on the collective experience of a teamof practitioners and academics, existing and emergingpractices and methodologies, and research to develop the Val IT framework.

9 The work of the team has been reviewedand further enhanced by a broader group of global advisors,including the organisations that have chosen to endorse thework of the the initiative evolves, it will include a number of types ofresearch activities, publications and supporting servicesgrouped around the core Val IT framework described in thisdocument, as illustrated in figure Objectives for Information and related Technology(COBIT ),1also from ITGI, provides a comprehensiveframework for the management and delivery of high-qualityinformation technology-based services. It sets best practicesfor the meansof contributing to the process of VALUE IT now adds best practices for the end, providing themeans to unambiguously measure, monitor and optimise therealisation of business VALUE from investment in IT.

10 Val ITcomplements COBIT from a business and financial perspectiveand will help all those with an interest in VALUE delivery from document, ENTERPRISE VALUE : GOVERNANCE of ITInvestments,The Val IT Framework, is the foundationdocument in the Val IT series, and presents key managementpractices for three processes: VALUE GOVERNANCE Portfolio management Investment managementThe guide and examples shown are applicable to allenterprises, addressing all of the aspects that should becontained in any IT investment appraisal. The guidance is not,however, intended to be prescriptive and should be tailored to fit the ENTERPRISE s management approach.